As the workplace continues to evolve, so too must the legal framework that governs fair termination of employment. The newly revised Code of Good Practice: Dismissal, published on 4 September 2025, addresses this evolution by expanding its scope and refining guidance on more complex grounds for dismissal. In this newsletter, the parts of the Code which address incapacity (including incompatibility, addiction, and imprisonment) and operational requirements (retrenchments) will be examined.

Key Themes Relating to Incapacity

  • Expanded Definition of Incapacity: Now includes ill health, injury, addiction, incompatibility, and imprisonment.
  • Structured Process: There is a greater onus on employers to assess the extent and cause of the incapacity, consult the employee, and explore alternatives before dismissal.
  • Progressive discipline is reaffirmed: The Code continues to favour corrective action over punitive measures.
  • Stronger alignment with obligations around reasonable accommodation for persons with disabilities or incapacity.
  • Work-related Incapacity: A higher duty to accommodate applies where the incapacity arises from workplace causes.

What’s New or Different – Incompatibility and the Challenge of Subjectivity

In certain circumstances, it is possible to dismiss employees for their inability to work harmoniously with their colleagues, or their failure to fit into the culture of the company. This process requires:

  • Evidence of disruptive conduct or untenable workplace relationships.
  • Demonstrated efforts to resolve the issue.
  • An opportunity for the employee to respond.

For employees in more senior or specialist positions, or possessing technical skills, the Code allows less strict procedural formalities. Depending on the nature of the role and whether the employee can judge their own performance, it may not be necessary to follow a long, procedurally stringent incapacity process. Employers are required to explore alternatives before dismissal on incapacity grounds. This might include counselling, training, adjustments or restructuring duties, or seeking medical advice or accommodation where applicable. The Code emphasises a focus on trying to preserve employment where possible.

Ultimately, the new Code retains the same procedures in terms of illness and injury, as well as the duty to assess the seriousness, duration, and alternative roles as it pertains to the process of incapacity. However, the new Code has included addiction and incompatibility as two new avenues in the incapacity arena, as well as the consideration of incapacity due to imprisonment. There is furthermore a much clearer alignment with reasonable accommodation obligations, as per the Employment Equity Act.

Implications for Employers

Employers are advised to:

  • Treat incompatibility as a matter of incapacity, not misconduct.
  • Follow the prescribed consultation and investigation process.
  • Be cautious when dealing with addiction-related issues, as rehabilitation must be considered.
  • Always explore accommodation or alternative roles before dismissal.

Key Themes Relating to Operational Requirements in the New Code

  • Unified Approach: Operational‑requirement dismissals (retrenchments) are now fully integrated into the main Code, replacing the separate “Code of Good Practice Based on Operational Requirements.”.
  • Definition and Scope: Retrenchments must be grounded in the employer’s economic, technological, structural, or similar needs.
  • Procedural Requirements: Employers must issue a written notice inviting consultation, containing relevant information, consultation must be in good faith and parties must aim to reach consensus, and the discussions must explore ways to avoid retrenchments, minimise the number of positions affected, change the timing of retrenchment, and mitigate negative impacts.
  • Selection Criteria: If no agreement is reached, selection criteria must be fair and objective, such as length of service, skills, or qualifications. Discriminatory criteria, such as union membership or pregnancy, for example, are strictly prohibited.
  • Small‑Business Flexibility: The Code recognises that small employers may lack resources for time‑intensive procedures, allowing for flexibility in applying retrenchment processes where practical. Despite flexibility on onerous procedural requirements for small businesses, they are however not exempt from following processes which are fair.
  • Consultation Periods: The timeframe for consultations depends on complexity. If section 189A applies, there is a minimum 60‑day consultation period, which may be extended for meaningful engagement.
  • Severance Pay: Employers must pay at least the minimum severance prescribed by the BCEA.
  • Preference for Re‑employment: Retrenchment‑eligible employees may be given preference for re‑employment if rehiring occurs, subject to consultation outcomes.
  • Notice Template: Annexure A provides a standardised Section 189(3) notice format for retrenchment consultations, improving clarity and consistency.

Implications for Employers

Employers are advised to:

  • Update retrenchment policies to reflect the New Code and use the Annexure A template for Section 189 notices.
  • Train HR and management on structured consultation, fair selection criteria, and proper timeline management during retrenchments.
  • For small businesses, document the practical limitations that justify a simplified process.
  • Keep a clear and auditable record of the consultation, decision-making, and any rehire preference decisions.
  • Ensure severance calculations and re-employment considerations are transparent and consistent.

Conclusion

These parts of the Code redefine incapacity in broader terms, reflecting modern workplace challenges. The structured process now applies to more scenarios, and employers must tread carefully when managing sensitive or subjective cases like incompatibility. The amendments further bring clarity and consistency to retrenchment, balancing operational demands with fairness and small business realities. Employers now have a unified, practical blueprint for handling retrenchments with integrity.

We encourage employers, IR/HR professionals, and legal practitioners to engage with these developments and share their insights.